Compensation and Client Wealth Among U.S. Investment Advisors

This study uses disclosure data from 7,043 Registered Investment Advisors (RIAs) in the United States to examine differences in client wealth by type of compensation. We find that firms charging commissions and hourly fees have a higher proportion of low net worth clients. Wealthier clients are more likely to be charged performance-based fees and fees based on assets under management. RIA firms that charge commissions are more likely to provide financial planning services and to have a larger number of employees and lower assets under management. Investment advisors who cater to lower net worth clients are more likely to rely on commission compensation, suggesting that policy restricting compensation may impact the provision of advising services to average investors.